Healthcare ETFs offer exposure to diverse companies engaged in the healthcare market and lower risk of investing in individual companies. Also, the segment provides stability since the healthcare industry’s demand remains unchanged despite economic downtrends.
Given this backdrop, let’s look at the fundamentally sound healthcare ETFs iShares U.S. Healthcare Providers ETF (IHF), Vanguard Health Care Index Fund ETF Shares (VHT), and The Health Care Select Sector SPDR Fund (XLV) poised for robust growth in 2024.
The global healthcare market is evolving swiftly with the rapid adoption of digital tech trends like IoT, artificial intelligence, and blockchain, which are opening new avenues for the sector. Trends revolutionizing the healthcare sector include Telemedicine, digital prescription and health records, efficient patient monitoring, personalized medicines, and genomics.
With this, the healthcare services market is projected to reach $22.57 trillion by 2031, exhibiting a CAGR of 8.3%. The fast market growth is attributable to factors like the increasing prevalence of chronic diseases, rising medical expenditures, sophisticated testing technology, and innovations through cutting-edge medical centers.
Besides, AI is transforming healthcare operations, improving efficiency, and enhancing systems and processes amid increasing healthcare costs and large data volumes and complexities. The global AI in healthcare market is expected to register a 48.1% CAGR, likely to expand to $148.40 billion by 2029.
Given these encouraging trends, let’s look at the fundamentals of the top three Health & Biotech ETFs, beginning with number 3.
ETF #3: iShares U.S. Healthcare Providers ETF (IHF)
IHF is an ETF that offers exposure to a narrow sub-sector of the health care industry, health care providers. The ETF invests in well-rounded, cap-weighted US companies engaged in managed health care, facilities, and insurance. The fund seeks to track the performance of the Dow Jones U.S. Select Health Care Providers Index.
The fund has assets under management (AUM) of $781.20 million. IHF’s top holdings include UnitedHealth Group Incorporated (UNH) with a 24.12% weighting, followed by Elevance Health, Inc. (ELV) at 13.45%, and Cigna Group (CI) and HCA Healthcare Inc (HCA) at 7.67% and 4.81%, respectively.
The ETF has a total of 68 holdings, with its top 10 assets comprising 73.18% of its AUM. IHF’s expense ratio is 0.40%, lower than the category average of 0.52%.
IHF pays an annual dividend of $0.42, which translates to a yield of 0.74% at the current price level. The company’s dividend payouts have increased at a CAGR of 15.6% over the past three years. IHF has paid its dividends for 12 consecutive years.
IHF has surged 11% over the past three months and 16.6% over the past year to close the last trading session at $57.53. It has a beta of 0.71. The fund’s NAV was $57.54 as of September 19, 2024.
IHF’s POWR Ratings reflect solid prospects. The fund has an overall rating of A, translating to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
IHF has an A grade for Trade and Buy & Hold. Within the B-rated Health & Biotech ETFs group, it is ranked #11 of the 42 ETFs.
To access all IHF’s POWR Ratings, click here.
ETF #2: Vanguard Health Care Index Fund ETF Shares (VHT)
VHT is an exchange-traded fund managed under the Vanguard Equity Index Group. The fund seeks to track the performance of a benchmark index that measures the stocks in the healthcare sector. It tracks the performance of the MSCI US IMI 25/50 Health Care by using a full-replication strategy.
With $18.81 billion in AUM, VHT’s top holdings are Eli Lilly and Company (LLY) with a 10.31% weighting, UNH at 8.43%, and AbbVie, Inc. (ABBV) and Johnson & Johnson (JNJ) at 5.20% and 4.69%, respectively. The ETF has a total of 418 holdings, with its top 10 assets comprising 47.73% of its AUM.
The fund has an expense ratio of 0.10%, lower than the category average of 0.52%. It has a beta of 0.73.
VHT pays an annual dividend of $3.56, which translates to a 1.25% yield at the current price level. Moreover, the fund’s dividend payouts have increased at a CAGR of 7.7% over the past three years. VHT has paid dividends for 17 consecutive years.
VHT has gained 15.8% over the past nine months and 18.8% over the past year to close the last trading session at $286.45. The fund’s NAV was $286.30 as of September 19, 2024.
VHT’s sound fundamentals are reflected in its POWR Ratings. The fund has an overall rating of A, equating to a Strong Buy in our proprietary rating system.
The fund has an A grade for Trade, Peer, and Buy & Hold. Of the 42 ETFs in the Health & Biotech ETFs group, VHT is ranked #2.
Click here to see all the VHT ratings.
ETF #1: Health Care Select Sector SPDR Fund (XLV)
XLV seeks to offer exposure to the U.S. healthcare industry across various segments, including pharmaceuticals, healthcare equipment and supplies, healthcare providers and services, and biotechnology. The fund tracks healthcare stocks within the S&P 500 Index, weighted by their market cap. It tracks the performance of the Health Care Select Sector index.
The fund has an AUM of $42.21 billion. Its top holdings include LLY with a 12.64% weighting, followed by UNH at a 9.29% weighting, and JNJ and ABBV at 7.02% and 5.97%, respectively. XLV has a total of 64 holdings, with the top 10 assets comprising 57.06% of its AUM.
The fund has an expense ratio of 0.09%, compared to the category average of 0.52%. Over the past month, XLV fund inflows came in at $268.93 million.
XLV’s annual dividend of $2.23 translates to a 1.44% yield at the current price level. Further, the fund’s dividend payouts have increased at a CAGR of 8.5% over the past five years. XLV has raised its dividends for 14 consecutive years.
XLV has gained 18.5% over the past year and 14.3% year-to-date to close the last trading session at $155.92. Also, it has a beta of 0.69. The fund has a NAV of $155.88 as of September 19, 2024.
XLV’s POWR Ratings reflect its strong outlook. The ETF has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.
XLV has an A grade for Buy & Hold and Trade. It also has a B grade for Peer. The fund has topped among the 42 ETFs in the same group.
To access all the POWR Ratings for XLV, click here.
What To Do Next?
43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.
XLV shares were unchanged in premarket trading Friday. Year-to-date, XLV has gained 15.19%, versus a 20.89% rise in the benchmark S&P 500 index during the same period.
About the Author: Rjkumari Saxena
Rajkumari started her career as a writer but gradually shifted her focus to financial journalism, leveraging her educational background in Commerce. Fascinated by the interplay of business and economic shifts in equities, she aspires to evolve as an analyst. With a knack for simplifying complex financial concepts, her mission is to empower investors with insights that lead to profitable decisions.
3 Healthcare ETFs to Buy for Defensive Growth in 2024 StockNews.com
